Every individual living in the United States must abide by the federal government’s income tax requirements.  Income tax is a form of government tariff that is imposed on the profits, or income, made by both individuals and other entities, such as corporations. In the United States, income tax is authorized by the Sixteenth Amendment to the United States Constitution, which authorizes Congress to tax “incomes from whatever sources derived.” Income tax rules are largely derived from the Internal Revenue Code and are notorious for their convoluted and unintuitive nature.

Personal Income Tax Requirements

By law, individuals who work for an employer will have income taxes taken out of their paycheck every period. The exact amount taken out is based on an individual’s income bracket, or their yearly salary, and a corresponding income tax percentage. This percentage increases as one’s income grows. For individuals who are self-employed or employed in non-traditional means, income tax must still be paid, but it is the responsibility of the individual to calculate and pay such taxes, often on a quarterly or yearly basis. Often times, self-employed individuals will pay estimated taxes ahead of schedule to cover what is owed in income taxes, and will receive reimbursement at the end of the year to the extent that they have overpaid.

Verifying Income Tax Payment

Every April 15, individuals across the United States are required to file a personal income tax return, which serves to determine and report gross income for the previous year and total taxes owed. If an individual has paid more in income taxes throughout the year than are actually owed, she will receive a refund. If she has not paid enough, she will be required to pay any amounts still outstanding.

Calculating actual gross income, adjusted income, and taxes due can be a very complicated process, as anyone who has completed a tax return can tell you. Taxable income includes not only wages received from a job, but also dividends, rental income, unemployment benefits, capital gains, and many other monetary benefits an individual has received.  However, before arriving at a gross income figure, individuals may also claim certain deductions, which reduce their overall income. These deductions are generally allowed for purposes that the government has determined further an overall good, such as deductions for necessary medical expenses, school tuition, or mortgage interest payments. Similarly, individuals may also qualify for tax credits that reduce overall tax owed to the government.

Failure to Pay Income Taxes

In most situations, an individual will be required to pay income taxes every year and file a tax return. In certain situations, such as while in school, an individual’s income may be so low that at return is not required. However, if an individual who is required to file a return fails to do so, stiff penalties can be imposed. If you fail to file a timely return, or to file a return at all, you may be subject to penalties and additional costs for late filing. If over six years have elapsed and a return still has not been filed, you may also be subject to criminal charges by the IRS, or find that garnishments are taken from your wages or government benefits to pay for overdue taxes. In an effort to avoid non-filing of a return, the government does allow individuals to seek extensions for filing. However, it is important to note that while these extensions give you more time to complete your return, they do not extend the time that you have to pay outstanding income tax.

Last updated April 2018